The Justice and Treasury departments issued a roadmap in February that would allow the new businesses to make payroll, save money and pay taxes, a move that enables the legalized marijuana industry to operate in Colorado and Washington state. In 2012, the two states became the first to approve recreational use of marijuana.
Rep. Hal Rogers, R-Ky., chairman of the House Appropriations Committee, challenged Lew at a hearing, questioning whether guidance to banks on doing business with legal marijuana sellers represents a "rubber-stamp" by the federal government for a predominantly illegal activity.
"Without any guidance, there would be a proliferation of cash-only businesses, and that would make it impossible to see when there are actions going on that violate both federal and state law and that ... would be a real concern," Lew told the House subcommittee on financial services. "We thought that the clarity, bringing it into daylight, was a better solution."
Ideally, Lew said, Congress would write a law to establish a policy. In its absence, the administration issued the guidelines that banks must review state license applications for marijuana customers, request information about the business, develop an understanding of the types of products to be sold and monitor publicly available sources for any negative information about the business.
The intent is to make banks feel more comfortable working with marijuana businesses that are licensed and regulated while ensuring that cash-only marijuana businesses won't be left vulnerable to criminals.
"What about cocaine dealers? Shouldn't they be given the same break?" Rogers pressed Lew.
"I'm not aware of any state that has legalized" cocaine, Lew answered.
"But aren't you aware that practically every state, marijuana still is considered illegal?" Rogers insisted.
Lew said the administration's actions only apply to states where marijuana is legal.
Rep. Mario Diaz-Balart, R-Fla., questioned Lew on whether the guidelines explicitly state that marijuana is illegal under federal law.
Lew said the guidance does not say that an illegal activity is legal. He said a number of banks are not accepting accounts from legal marijuana sellers and they understand they're in an area where they are at risk.
Associated Press writer Pete Yost contributed to this report.